NaturalGasFactBook-Mar2011
Content
Conference Edition 2011
Company Overviews
Analyst Contacts:
Holly Stewart (713) 393-4512
Abigail Mayo (713) 393-4511
All relevant disclosures and certifications begin on Page 19 of this booklet.
Table of Contents
Alphabetical by Company El Paso Corporation........................................................ 4 Energen Corporation ...................................................... 5 EQT Corporation ............................................................ 6 MDU Resources Group, Inc. .......................................... 7 National Fuel Gas Company ......................................... 8 Questar Corporation....................................................... 9 Williams.......................................................................... 10 Company Statistics 2010 E&P Snapshot/E&P CAPEX Stand-Alone E&P Valuation ..................................... 12 Trading Valuations / Free Cash Flow .......................... 13 Hedging Detail ............................................................... 14 Recent Shale Positions .................................................. 15 Performance Summary................................................. 16 Market Stats / Valuation ............................................... 17 Basic Definitions ............................................................ 18
2011 ENERGY CONFERENCE
2
PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E&P Stats
2008A 2,326 -18.5% 74.9% 25.1% 271.6 -5.2% 87.5% 12.5% 8.6 2009A 2,549 9.6% 68.5% 31.5% 252.6 -7.0% 87.4% 12.6% 10.1 2010A 3,171 24.4% 61.7% 38.3% 262.8 4.0% 87.0% 13.0% 12.1 273.4 4.0% 84.8% 15.2% 13.5 2011E 3,700 16.7%
EP V alu ati on Sn ap shot
2010A EPSE $0.99 -26.7% $2.82 -9.5% 17.9x 6.3x 8.5x $1.31 % Change CFPSE % Change Trading m e tri cs P/E P/CF EV/EBITDA EV/Mcfe 17.2x 6.2x 8.0x 13.6x 5.2x 7.2x 11.8x 4.8x 6.7x 2011E $1.03 4.1% $2.84 0.8% 2012E $1.30 26.6% $3.41 20.2% 2013E $1.49 14.9% $3.70 8.4%
El Paso Corporation
www.elpaso.com
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio Costs Detail ($/mcfe) LOE Production taxes G&A F&D ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield
EP $17.63 $18.77 $10.17 $12,447 $26,106 706 $13,659 81.6% 0.2%
Standalo ne E& P busine ss
Management Douglas L. Foshee, Chairman & CEO John R. Sult, CFO Inv est or Relat ions C ont act Bruce Connery
Cap Ex Detail ($mm)
Pipeline Group Exploration & Production Corporate & Other To ta l 2010 $2,518 $1,330 $125 $ 3 ,9 7 3 2011E $1,700 $1,300 $200 $ 3 ,2 0 0 % C ha nge -32.5% -2.3% 60.0% -1 9 .5 %
713-420-5855
$0.90 $0.44 $0.59 $36.83
$0.77 $0.22 $0.77 $2.12
$0.72 $0.27 $0.72 $1.41
$0.79 $0.28 $0.75 $1.58
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $489 $13,517 $3,167
E&P
RESERVES BY REGION
2010 Proved Reserves
Brazil 3% Central U.S. 42%
2010A EB IT b y Segmen t
2011E EB IT by Segment
Marketing, Trading & Other 1% 30% E&P 28%
Marketing, Trading & Other 3%
81.0% 81.6% 81.2% $347 $3,550 $1,900
Gulf Coast 20%
Pipelines 69% Pipelines 69%
Western U.S. 35%
COMPANY PROFILE
El Paso Corp. operates natural gas pipeline and storage facilities, transports natural gas, and imports liquefied natural gas. The Company has interests in approximately 43k miles of interstate pipeline which is considered North America's largest interstate natural gas pipeline system. El Paso also operates in the exploration and production business, housing over 3 Tcfe of oil and gas reserves. El Paso is a top 25 U.S. natural gas producer in terms of production volume.
Nat ural G as Transmission El Paso's pipeline system handles ~30% of the daily throughput (19 Bcf/d) of natural gas from North America's major producing basins. The Company is the majority interest owner in eight major pipeline systems and partially owns two systems. El Paso plans to complete $8b of backlog projects by the end of 2011, including Ruby Pipeline. El Paso's MLP, El Paso Pipeline Partners, owns a 100% stake in both WIC and Elba Express, along with a 58% stake in CIG and an 82% stake in SNG. El Paso owns the 2% general partnership interest and +45% of the outstanding limited partnership units. Explorat ion and Product ion El Paso's E&P company finds, develops, and produces natural gas, oil, and NGLs in the U.S., Brazil and Egypt. During 2010, El Paso continued to focus on its more unconventional resources through its four core programs: the Haynesville Shale in northwest Louisiana and east Texas, the Eagle Ford Shale in south Texas, the Altamont field in Utah and the Wolfcamp Shale oil play in the Permian Basin of West Texas.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E& P Stats
2008A 1,584 -9.7% 83.9% 16.1% 102.4 3.8% 66.0% 34.0% 15.5 2009A 1,547 -2.4% 83.4% 16.6% 111.2 8.7% 65.0% 35.0% 13.9 2010A 1,818 17.5% 76.5% 23.5% 113.0 1.6% 62.8% 37.2% 16.1 122.5 8.4% 58.5% 41.5% 15.7 2011E 1,918 5.5%
EGN V aluation Snap shot
2010A EPSE $4.38 23.2% $9.31 -1.5% 14.0x 6.6x 6.6x $2.21 % Change CFPSE
EG N $61.53 $63.52 $40.25 $4,435 $5,128 72 $693 24.9% 0.9%
2011E $3.53 -19.4% $9.32 0.1% 17.4x 6.6x 7.1x
2012E $3.67 3.9% $9.97 6.9% 16.8x 6.2x 6.6x
2013E $4.97 35.4% $12.02 20.6% 12.4x 5.1x 5.3x
Energen Corporation
www.energen.com
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio Costs Detail ($/mcfe) LOE Production taxes G&A F&D ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield
% Change Trading m e trics P/E P/CF EV/EBITDA Standa lo ne E& P busine ss EV/Mcfe (proved)
Management James T. McManus, II, Chairman & CEO Charles W. Porter, Jr., CFO Inv est or Relat ions C ont act Julie S. Ryland
Cap Ex Detail ($mm)
E&P Development E&P Acquisitions Utility To ta l 2010 $368 $409 $94 $871 2011E $664 $0 $75 $739 % C hange 80.4% -100.0% -19.8% -1 5 .1 %
205-326-2634
$1.70 $0.61 $0.45 ($7.28)
$1.63 $0.32 $0.56 $5.47
$1.61 $0.38 $0.52 $2.03
$1.68 $0.39 $0.52 $2.97
S hare Repurchase S napshot (shares in millions) Authorized 12.6 Remaining 9.0
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $310 $405 $2,154 15.8% 24.9% 24.3% $23 $1,019 $714
RESERVES BY REGION
2010 Proved Reserves
North LA / East TX 2% Black Warrior Basin 9% San Juan Basin 45%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Natural Gas Natural Gas Distribution 17% Distribution 20%
Exploration & Production 83% Exploration & Production 80%
Permian Basin 44%
COMPANY PROFILE
Energen Corporation, a diversified energy holding company, engages in the acquisition, development, exploration, and production of oil, natural gas, and NGLs in the continental United States. Energen also purchases, distributes, and sells natural gas to residential, commercial, and industrial customers in central and north Alabama. The Company's two principal subsidiaries are Energen Resources Corporation and Alabama Gas Corporation (Alagasco).
Oil and Gas Operat ions Energen Resources' proved oil and gas reserves at the end of 2010 totaled 1.8 Tcfe. Nearly all of these reserves are located in either the San Juan Basin in New Mexico and Colorado, the Permian Basin in west Texas, or the Black Warrior Basin in Alabama. Of the Company's year end reserves, natural gas represents approximately 53%, oil represents 34% and NGLs make up the balance. Energen completed four Permian Basin acquisitions in 2010, totaling $550mm, and plans to allocate more than 80% of 2011 drilling capital toward oil development in the Permian. Nat ural G as Dist ribut ion Alagasco is the largest natural gas distribution utility in the state of Alabama, serving approximately 445,000 homes, businesses and industries in north and central Alabama.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E&P Stats
2008A 3,110 15.9% 60.9% 39.1% 84.0 9.0% 92.3% 7.7% 37.0 2009A 4,068 30.8% 51.0% 49.0% 100.1 19.2% 90.9% 9.1% 40.6 2010A 5,220 28.3% 48.6% 51.4% 134.6 34.5% 91.7% 8.3% 38.8 173.9 29.2% 92.6% 7.4% 35.6 2011E 6,188 18.5%
EQT V alu ati on Snap sh ot
2010A 2011E $1.80 14.0% $4.92 -9.5% 26.4x 9.7x 10.6x 2012E $2.19 21.8% $5.76 17.1% 21.7x 8.2x 8.7x 2013E $2.92 33.4% $6.92 20.0% 16.3x 6.9x 7.0x EPSE % Change CFPSE
EQT $47.50 $49.76 $32.23 $7,085 $9,088 149 $2,003 39.4% 1.9%
EQT Corporation
www.eqt.com
$1.58 4.1% $5.44 -1.5% 30.1x 8.7x 12.0x $1.10
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio Costs Detail ($/mcfe) LOE Production taxes G&A F&D ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management David L. Porges, President & CEO Philip P. Conti, CFO Inv est or Relat ions C ont act Patrick J. Kane, CFA
% Change Tra ding m e trics P/E P/CF EV/EBITDA EV/Mcfe (proved)
Sta nda lo ne E& P busine ss
Cap Ex Detail ( $mm)
Production Midstream Distribution To tal 2010 $1,246 $193 $39 $ 1 ,4 7 8 2011E $691 $244 $35 $970 % C ha nge -44.5% 26.4% -10.3% -3 4 .4 %
412-553-7833
$0.35 $0.52 $0.38 $1.32
$0.30 $0.29 $0.35 $0.66
$0.24 $0.24 $0.41 $0.97
$0.25 $0.24 $0.39 $0.61
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $60 $1,943 $3,079 38.7% 39.4% 39.4% $0 $1,500 $1,423
RESERVES BY REGION
2010 Proved Reserves
Coalbed Methane 3%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Other Distribution 16% 3% Production 45% Distribution 14% Other 5% Production 43%
Huron/Berea 42%
Midstream 36%
Midstream 38%
Marcellus 55%
COMPANY PROFILE
EQT Corporation operates as an integrated energy company with emphasis on Appalachian area natural gas supply, transmission, and distribution. EQT breaks down into three segments: EQT Production, EQT Midstream and EQT Distribution. The Company is nearly 100% natural gas, with a focus on shale, tight sands and coal bed methane.
EQT Product ion As one of the largest operators in the Appalachian Basin, EQT controls 3.5 million acres across three major plays: Marcellus Shale, Huron Shale and CBM. As of December 31, 2010, EQT's proven reserves of 5.2 Tcfe grew ~30% for the second consecutive year. EQT Midst ream EQT Midstream provides gathering, transmission and storage services for the Company's produced gas as well as to other independent Appalachian third parties. EQT Midstream has +11,400 miles of gathering and transmission lines and also owns 63 Bcf of underground storage capacity. In February 2011, EQT sold its gas processing facility in Langley, Kentucky, as well as the associated NGL pipeline for $230mm. EQT Dist ribut ion Equitable Gas Company distributes and sells natural gas to ~277k customers (93% are residential customers and the remaining are commercial and industrial customers) in southwestern Pennsylvania, West Virginia and eastern Kentucky.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E&P Stats
2008A 810 14.6% 73.1% 26.9% 82.3 6.9% 79.5% 20.5% 9.8 2009A 654 -19.3% 73.8% 26.2% 75.3 -8.5% 75.2% 24.8% 8.7 2010A 646 -1.2% 76.6% 23.4% 70.0 -7.1% 72.0% 28.0% 9.2 68.4 -2.2% 69.2% 30.8% 9.6 2011E 653 1.2%
MDU V aluation Snap shot
2010A EPSE $1.30 -7.1% $2.93 -35.8% 17.2x 7.6x 7.1x $1.65 % Change CFPSE % Change Trading m e trics P/E P/CF EV/EBITDA EV/Mcfe (proved) 16.9x 6.4x 6.8x 16.0x 6.1x 6.4x 14.7x 5.7x 5.9x 2011E $1.33 1.7% $3.52 20.2% 2012E $1.40 5.6% $3.66 3.8% 2013E $1.52 8.7% $3.93 7.3%
MDU Resources Group, Inc.
www.mdu.com
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management Terry D. Hildestad, President & CEO Doran N. Schwartz, CFO Inv est or Relat ions C ont act Phyllis A. Rittenbach
MD U $22.38 $22.90 $17.11 $4,216 $5,536 188 $1,320 36.2% 2.9%
Standalo ne E& P busine ss
Cap Ex Detail ($mm)
Electric Utility Gas Distribution Pipeline & Energy Services Construction Services Construction & Mining Oil and Gas Prod. To ta l 2010 $86 $75 $14 $15 $26 $356 $572 2011E $76 $80 $41 $10 $39 $306 $552 % C hange -11.6% 6.7% 192.9% -33.3% 50.0% -14.0% -3 .5 %
701-530-1057
Costs Detail ($/mcfe) LOE Production taxes G&A F&D ($/mcfe)
$1.00 $0.66 $0.30 $3.79
$0.93 $0.39 $0.32 ($2.22)
$0.98 $0.51 $0.34 $5.72
$1.00 $0.52 $0.35 $4.01
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $93 $1,434 $2,693 34.7% 36.2% 32.6% $222 $765 $610
E&P 33%
RESERVES BY REGION
2010 Proved Reserves
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Electric 1 1 %
Natural Gas 1 7%
E&P 30%
Electric 1 1 %
Natural Gas 1 7%
Mid-Con/Gulf States 26%
Construction & Mining 1 4%
Pipeline & Energy Services 1 7%
Construction Services 8%
Construction & Mining 1 6%
Pipeline & Energy Services 1 7%
Construction Services 9%
Rockies 74%
COMPANY PROFILE
MDU Resources Group, Inc. operates as an integrated energy company, comprised of both regulated and unregulated business. The Company consists of six operating segments: Exploration & Production, Gas & Electric Utilities, Pipeline and Energy Services, Construction Materials and Construction Services.
Nat ural G as & Oil Product ion MDU's E&P company, Fidelity Exploration & Production, develops natural gas and oil reserves in the U.S. Fidelity operates in the Rocky Mountains and the Mid-Continent/Gulf States. As of year-end 2010, MDU had ~645 Bcfe of proven reserves (69% nat gas/ 31% oil). During 2010, MDU acquired undeveloped acreage in the Niobrara play (65k net acres) in WY and expanded its acreage position in the ND Bakken play (66k net acres). Pipeline & Energy S erv ices MDU provides natural gas transportation, underground storage and gathering services through regulated and nonregulated pipeline systems primarily in the Rockies and the northern Great Plains region of the U.S. C onst ruct ion Mat erials & S ervices MDU's Construction Materials business, Knife River Corporation, is a top 10 U.S. aggregate producer with total reserves of 1.1b tons. Product lines include crushed stone, sand and gravel, asphalt, ready-mix concrete, building materials, and liquid asphalt production. MDU's Construction Services Group provides various construction activities, such as constructing and maintaining electric and communication lines, fire protection systems, and external lighting and traffic signalization equipment. This group expanded into new markets during 2010, including solar and wastewater work as well as utility excavation services. G as & Elect ric Ut ilit ies MDU's gas & electric distribution segment provides generation, transmission, and distribution of energy across eight states through four companies: Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Co. and Intermountain Gas Corporation. MDU serves 960k gas and electric customers across eight states.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E& P Stats
2008A 503 2.5% 86.6% 13.4% 40.8 3.7% 54.8% 45.2% 12.3 2009A 528 5.0% 83.5% 16.5% 42.5 4.3% 52.4% 47.6% 12.4 2010A 700 32.4% 74.6% 25.4% 49.7 16.8% 61.1% 38.9% 14.1 69.9 40.8% 72.8% 27.2% 12.9 2011E 902 28.9%
N FG V aluation Snap sh ot
2010A EPSE $2.65 1.4% $5.56 -26.4% 26.8x 12.8x 10.8x $6.32 % Change CFPSE
NF G $70.92 $73.66 $42.83 $5,916 $6,906 83 $990 37.9% 1.9%
2011E $2.69 1.5% $7.02 26.2% 26.4x 10.1x 10.1x
2012E $2.93 8.9% $7.94 13.2% 24.2x 8.9x 8.7x
2013E $3.38 15.4% $9.14 15.1% 21.0x 7.8x 7.3x
National Fuel Gas Company
www.nationalfuelgas.com
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio Costs Detail ($/mcfe) LOE & Prod. Taxes G&A F&D ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management David F. Smith, Chairman & CEO Ronald J. Tanski, President & COO Inv est or Relat ions C ont act Timothy Silverstein
% Change Tra ding m e trics P/E P/CF EV/EBITDA EV/Mcfe
Sta nda lo ne E& P busine ss
Cap Ex Detail ( $mm)
Utility Pipeline & Storage E&P Corporate & Other To tal 2010 $58 $38 $398 $7 $501 2011E $58 $125 $628 $28 $838 % C ha nge -0.8% 229.9% 57.6% 276.1% 6 7 .0 %
$1.64 $0.60 $3.06
$1.47 $0.69 $3.07
$1.24 $0.64 $1.77
$1.23 $0.67 $2.45
716-857-6987
S hare Repurchase S napshot (shares in millions) Authorized 8.0 Remaining 7.0
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $171 $899 $1,755 33.9% 37.9% 36.1% $80 $705 $705
RESERVES BY REGION
2010 Proved Reserves
Gulf 5%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Energy Mkt. & Other 2% Utility 29%
Energy Mkt. & Other 1% Utility 28%
Appalachia 47%
E&P 50% Pipeline & Storage 19%
E&P 54%
Pipeline & Storage 17%
West Coast 48%
COMPANY PROFILE
National Fuel Gas Company operates as a diversified energy company in several segments of the natural gas industry, including utility, pipeline and storage, exploration and production, and marketing operations. Both its regulated and unregulated businesses have a Northeast focus.
Explorat ion & Product ion Seneca Resources Corporation explores, develops, and purchases natural gas and oil reserves in the Appalachian region and California. The Company recently announced the sale of its shallow water Gulf of Mexico producing assets for $70mm, officially exiting the GOM. Seneca ended 2010 with 700 Bcfe of proved reserves (a +30% y/y increase). Pipeline & S t orage National Fuel Gas Supply Corp. and Empire Pipeline, Inc. provide natural gas transportation and storage services to companies through an integrated system of ~3,000 miles of pipeline and 31 natural gas storage fields. The Company has several new pipeline projects in various stages that will help bring Appalachian gas to market. These projects include: Tioga County Extension Project, Line N Expansion Project, Northern Access Project and West to East Overbeck to Leidy Project. Ut ilit y National Fuel's utility segment, National Fuel Gas Distribution Corporation, sells and transports natural gas to nearly 732k customers in western New York and northwestern Pennsylvania.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
STR V aluati on Sn ap sh ot
2010A 2011E $1.13 -0.3% $2.30 16.8% 15.3x 7.5x 8.3x 2012E $1.20 6.1% $2.43 5.5% 14.5x 7.1x 7.9x 2013E $1.27 6.0% $2.56 5.5% 13.6x 6.7x 7.3x EPSE % Change CFPSE % Change Tra ding m e trics P/E P/CF EV/EBITDA 15.3x 8.8x 8.6x $1.13 10.3% $1.97 -18.9%
Wexp ro Stats
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change R/P ratio Investment Base ($mm) % change Return on Investment Capital Expenditures ($mm) 2008A 674 5.0% 72.7% 27.3% 48.5 29.7% 13.9 $411 36.7% 18.0% $144 2009A 676 0.4% 73.3% 26.7% 50.6 4.3% 13.4 $432 5.2% 18.7% $116 2010A 768 13.5% 62.9% 37.1% 52.6 4.0% 14.6 $457 5.7% 19.3% $91
Questar Corporation
www.questar.com
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management Ronald W. Jibson, President & CEO Kevin W. Hadlock, CFO
S TR $17.28 $18.30 $13.56 $3,090 $4,390 179 $1,301 56.1% 3.5%
Cap Ex Detail ($mm)
Wexpro Questar Pipeline Questar Gas To tal 2010 $91 $122 $109 $321 2011E $100 $105 $132 $337 % C ha nge 10.4% -13.7% 21.5% 5 .0 %
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $424 $899 $1,036 46.4% 56.1% 55.7% $22 $600 $358
RESERVES BY REGION
2010 Proved Reserves
Utah 11% Other 1%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Questar Pipeline 37%
Wexpro 38%
Questar Pipeline 37%
Wexpro 38%
Colorado 20%
Questar Gas 25%
Questar Gas 25%
Wyoming 68%
COMPANY PROFILE
Questar Corporatiom is an integrated energy company with three lines of business including retail gas distribution, interstate gas transportation and storage and gas development and production. Questar spun off its unregulated E&P and Midstream businesses last year, leaving the regulated assets at Questar Corp. Wexpro As Questar's "crown jewel", Wexpro develops and produces gas reserves and provides cost of service gas to Questar's utility, Questar Gas. Wexpro is allowed a guaranteed after-tax rate of return of 19-20% on its investment base. Wexpro produced 50 bcf of gas during 2010 and finished the year with an investment base of $457mm. Wexpro has over 900 risked locations yet to drill, equating to $1.4b of potential future investment. Quest ar Pipeline Questar Pipeline provides natural gas transportation and underground storage services in the Rocky Mountain Region. Questar Pipeline, along with its subsidiaries, owns 2,568 miles of interstate pipeline with total firm capacity commitments of 4,744 Mdth per day. Quest ar G as Questar's utility company, Questar Gas, distributes natural gas in Utah, southwestern Wyoming, and a small portion of southeastern Idaho. In 2010, Questar Gas generated ~25% of Questar's operating income and currently serves nearly 910k sales and transportation customers.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E& P Stats
2008A 4,339 4.7% 56.6% 43.4% 418.7 19.2% 10.4 2009A 4,255 -1.9% 56.1% 43.9% 451.2 7.8% 9.4 2010A 4,272 0.4% 58.5% 41.5% 432.6 -4.1% 9.9 466.2 7.8% 9.7 2011E 4,507 5.5%
WMB V alu ati on Snap sh ot
2010A EPSE % Change CFPSE
WMB $30.46 $31.00 $17.53 $18,098 $26,411 594 $8,313 55.6% 1.6%
2011E $1.50 17.1% $4.99 11.5% 20.3x 6.1x 6.9x
2012E $1.55 3.2% $5.42 8.8% 19.7x 5.6x 6.4x
Williams
www.williams.com
$1.28 36.9% $4.47 2.5% 23.8x 6.8x 7.8x $2.16
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change R/P ratio Costs Detail ($/mcfe) LOE Production taxes G&A F&D, ex acquisition ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management Alan S. Armstrong, President & CEO Don R. Chappel, CFO Inv est or Relat ions C ont act Travis Campbell
% Change Tra ding m e trics P/E P/CF EV/EBITDA Sta nda lo ne E& P busine ss EV/Mcfe
Cap Ex Detai l ($mm)
Williams Partners (WPZ) E&P Other To ta l 2010 $837 $1,839 $112 $ 2 ,7 8 8 2011E $1,743 $1,450 $430 $ 3 ,6 2 3 % C ha nge 108.2% -21.2% 283.9% 2 9 .9 %
$0.66 $0.60 $0.43 $3.04
$0.60 $0.18 $0.41 $4.84
$0.66 $0.34 $0.43 $3.67
$0.60 $0.32 $0.42 $2.13
918-573-2944
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $508 $8,600 $7,288 54.1% 55.6% 53.3% $795 $2,650 $2,650
RESERVES BY REGION
2010 Proved Reserves
Appalachia 1% Williston 3%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Corp. & Other E&P 18% 2%
E&P 15%
Corp. & Other 2%
Fort Worth 5% San Juan 13%
Other 2%
Powder River 8%
WPZ 80% WPZ 83%
Piceance 68%
COMPANY PROFILE
Williams (WMB) engages in the exploration & production, gathering & processing, and transportation of natural gas. Williams operates through the following business segments: its MLP, Williams Partners (WPZ), Exploration and Production, and Other. In February 2011, WMB announced its plan to separate the E&P business into a standalone, publicly traded company via an IPO of up to 20% of Williams' interest in 3Q'11. The IPO will be followed by a tax-free spin of the remaining ownership in 2012. Williams will ultimately own its GP and LP interest in WPZ, a domestic olefins business and a Canadian midstream business.
Explorat ion & Product ion Williams E&P business includes natural gas and oil development, production and gas marketing activities primarily in the Rocky Mountain, Northeast and Mid-Continent regions of the U.S. The Company ended 2010 with 4.3 Tcfe of proved reserves, of which 97% were natural gas. Williams remains a top 10 U.S. natural gas producer. Williams Part ners L. P. (WPZ) Gas Pipeline: Williams operates approximately 13,900 miles of interstate natural gas pipelines, with design capacity of more than 13 MMdt per day. The Company operates three natural gas pipelines (Transco, Northwest Pipeline and Gulfstream) that deliver approximately 12% of the natural gas consumed in the U.S. WPZ owns 24.5% interest in Gulfstream pipeline, and a 25.5% interest is retained by WMB. Midstream: Primary businesses include natural gas gathering, treating and processing, NGL fractionation, storage and transportation, and oil transportation. WMB's midstream assets are concentrated in several major producing basins including CO, NM, WY, the GOM and the Marcellus Shale in PA.
2011 ENERGY CONFERENCE
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2011 ENERGY CONFERENCE 10
2010 E&P Snapshot
Hybrid Group - 2 0 1 0 E& P Snapshot EP EGN EQT M DU Production H ig hlig hts Total production (bcfe) y/y % total production growth y/y % gas production growth y/y % oil production growth % gas component % oil/liquids component Realized Gas Price ($/mcf) Realized Oil Price ($/bbl) Reserve H ig hlig hts Total Reserves (bcfe) % change % PDP % PUD Reserve Life Capital Spending H ig hlig hts Development ($mm) Exploration ($mm) Acquisitions ($mm) Total Capital ($mm) Total F&D Costs ($/mcfe) F&D Costs (ex acquisition) 263 4% 3% 6% 87% 13% $5.67 $64.50 3,171 24% 62% 38% 12.1 $276 600 320 $1,196 $1.41 $1.11 113 2% -2% 9% 63% 37% $6.82 $78.86 1,818 17% 77% 23% 16.1 $333 37 409 $779 $2.03 $1.61 135 34% 36% 22% 92% 8% $3.93 $70.42 5,220 28% 49% 51% 38.8 $881 5 358 $1,244 $0.97 $0.69 70 -7% -11% 5% 72% 28% $4.36 $65.85 646 -1% 77% 23% 9.2 $140 33 182 $355 $5.72 nm NFG 50 17% 36% -5% 61% 39% $6.04 $75.25 700 32% 75% 25% 14.1 $234 75 81 $390 $1.77 $1.40 WMB 433 -4% -4% nm nm nm $5.23 n/a 4,272 0% 58% 42% 9.9 $988 22 1,731 $2,741 $6.27 $3.67
E&P CAPEX Detail
E&P Cap Ex Detail ($mm)
2009A $1,000 $427 $717 $183 $188 $1,434 $658 2010A $1,330 $777 $1,246 $356 $398 $1,839 $991 2011E $1,300 $664 $691 $306 $628 $1,450 $840 '1 1 vs. '1 0 % C hange -2% -15% -45% -14% 58% -21% -1 5 % -1 5 .3 % EP EGN * EQT M DU* * NFG WMB Average
* 2010 includes $409mm of acquisition capital (Permian Basin) and $368 of development capital ** 2010 includes ~$100mm for Green River Basin acquisition Source: Howard Weil & Companies
Stand-Alone E&P Valuation
Calculation of Enterprise Value for standalone E&P Business
Company EV Other segments Pipes Midstream Utility Other Total other segment EV Standalone E&P EV E&P EBITDA (2012) EV/ '1 2 EBITDA N et EV/ m cfe (proved) Net EV/ mcfe (3P)
Source: Howard Weil
EP $26,106 19,913 1,795 21,708 $4,398 $1,336 3 .3 x $ 1 .3 1 $0.51
EGN $5,128 1,116 1,116 $4,011 $640 6 .3 x $ 2 .2 1 $1.08
EQT $9,088 2,546 791 3,337 $5,750 $642 9 .0 x $ 1 .1 0 $0.62
M DU $5,536 917 1,716 1,835 4,469 $1,067 $298 3 .6 x $ 1 .6 5 $0.67
NFG $6,906 1,030 1,376 79 2,486 $4,420 $481 9 .2 x $ 6 .3 2 $0.34
WMB $26,411 0 0 17,231 17,231 $9,180 $1,381 6 .6 x $ 2 .1 6 $0.81
2011 ENERGY CONFERENCE
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Trading Valuations
Historical Valuations
(assum ing last 8 -y rs of trading ) C om panies EP EGN EQT MDU NFG STR WMB Group Avg P/E 14.8 x 12.3 x 19.2 x 14.1 x 15.9 x 15.5 x 19.7 x 1 5 .9 x P/C F 4.1 x 6.7 x 10.8 x 6.8 x 7.4 x 7.3 x 6.5 x 7 .1 x EV/EBITDA 6.9 x 5.9 x 9.5 x 6.3 x 7.2 x 7.3 x 7.0 x 7 .1 x
Current Valuations
(on 2 0 1 2 estim ates) P/E 13.6 x 16.8 x 21.7 x 16.0 x 24.2 x 14.5 x 19.7 x 1 8 .0 x P/C F 5.2 x 6.2 x 8.2 x 6.1 x 8.9 x 7.1 x 5.6 x 6 .8 x EV/EBITDA 7.2 x 6.6 x 8.7 x 6.4 x 8.7 x 7.9 x 6.4 x 7 .4 x
Source: Howard Weil & Thomson One
Free Cash Flow
N atural Gas Hybrids -- 2012E Free Cash Flow
C om panies El Paso Corp Energen Equitable Resources MDU Resources National Fuel Gas Questar Williams Gro up Ave rage
Source: Howard Weil
Tick e rs EP EGN EQT MDU NFG STR WMB
FFO $2,582 $725 $877 $706 $683 $440 $3,254
2012E C ap-e x ($2,680) ($751) ($1,061) ($701) ($789) ($336) ($3,495)
F ree -C F ($98) ($25) ($185) $5 ($106) $104 ($241)
F ree C F Y ie ld -0.7% -0.6% -2.6% 0.1% -1.7% 3.3% -1.3% -0 .5 %
C urrent N e t Debt C ash 84% $347 25% $23 39% $0 36% $222 38% $80 56% $22 58% $77 48% $110
2011 ENERGY CONFERENCE 12
Hedging Detail
Natural Gas Hybrids -- Hedging Detail
C om panies Tick ers El Paso C orp EP Gas Oil Energen EGN Gas Oil Equitable Resources EQT Gas Oil M DU Resources MDU Gas Oil N ational F uel Gas NFG Gas Oil W illiam s WMB Gas Oil Group Average Gas Position Group Average Oil Position
*Using an average of the last 4 years Source: Howard Weil
2011 % Price 71% 76% 73% 69% 42% $5.95 $86.06 $6.20 $78.10 $5.02
2012 % Price 41% 57% 55% 48% 20% $6.01 $91.31 $5.02 $82.34 $5.50
Historical Position (%)* 61% 38% 71% 75% 53%
46% 52% 52% 54% 53% 56% 63%
$5.31 $82.06 $6.24 $70.76 $5.25 $ 5 .6 6 $ 7 9 .2 5
15% 48% 24% 44% 29% 31% 50%
$5.62 $85.01 $6.42 $73.55 $5.07 $ 5 .6 1 $ 8 3 .0 5
45% 18% 59% 42% 49% 56% 43%
2011 ENERGY CONFERENCE
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Recent Shale Positions
Natural Gas Hybrids -- Shale Positions Gas Plays Oil Plays
C om panies El Paso Corp. Energen Corp. Tick ers EP EGN Shale Haynesville Eagle Ford Haynesville Marcellus Niobrara Huron* Marcellus Acreage (net) 46,000 68,000 12,000 200,000 55,500 2,700,000 520,000 Shale Wolfcamp Eagle Ford Avalon Wolfberry Niobrara Acreage (net) 138,000 102,000 80,000 26,300 54,000
Equitable Resources MDU Resources
EQT MDU
Bakken Niobrara Heath Marcellus Barnett Marcellus 745,000 Bakken 29,482 99,301
66,000 65,000 80,000 89,420
National Fuel Gas Williams
NFG WMB
*EQT includes the Lower Huron, Cleveland, Berea sandstone and other Devonian shales,
except the Marcellus, in its Huron play.
2011 ENERGY CONFERENCE 14
Performance Summary
Companies Natural Gas Hybrids El Paso Corp Energen Corp EQT Corp. MDU Resources National Fuel Gas Questar Corp Williams Group Average Indices SPX XNG E&P PIPES OSX UTY XOI AMZ Spot HHub Gas ($/Mcf) Spot WTI Crude ($/Bbl) Tick ers EP EGN EQT MDU NFG STR WMB 12/31/10 $13.76 $48.26 $44.84 $20.27 $65.62 $17.41 $24.72 Stock Price 3/18/11 3/23/11 $17.27 $61.17 $46.87 $21.90 $69.40 $17.04 $29.69 $17.63 $61.53 $47.50 $22.38 $70.92 $17.28 $30.46 Y TD 28.1% 27.5% 5.9% 10.4% 8.1% -0.7% 23.2% 14.6% % Change M TD WTD -5.2% 0.7% -3.7% 4.2% -2.7% -3.3% 0.3% -1.4% 2.1% 0.6% 1.3% 2.2% 2.2% 1.4% 2.6% 1.8% Today -0.6% -0.7% -0.3% -0.5% -0.6% -0.6% -0.1% -0.5% 52-Week Performance High Low $18.77 $63.52 $49.76 $22.90 $73.66 $18.30 $31.00 $10.17 $40.25 $32.23 $17.11 $42.83 $13.56 $17.53 Relative Perform ance YTD (bps) vs Group vs UTY vs XNG vs. S&P 1,348 1,285 (871) (424) (657) (1,539) 858 2,877 2,814 657 1,105 872 (10) 2,386 1,529 1,600 1,537 (620) (172) (405) (1,287) 1,109 252 2,495 2,432 276 724 490 (392) 2,005 1,147
SPX-UT XNG-P S15OILP BUSPIPE OSX-IND UTY-IND XOI-P AMZ-N
1,257.6 605.5 597.4 75.6 245.1 421.8 1,213.2 363.6 $4.23 $91.38
1,279.2 662.4 656.8 82.5 278.0 413.3 1,310.5 366.1 $4.00 $101.07
1,297.5 678.9 678.0 84.3 287.8 419.1 1,349.3 373.1 $4.18 $105.20
3.2% 12.1% 13.5% 11.5% 17.4% -0.6% 11.2% 2.6% -1.2% 15.1%
-2.2% 0.0% -0.1% -0.7% -0.7% -2.2% -1.2% -2.4% 6.6% 8.5%
1.4% 2.5% 3.2% 2.2% 3.5% 1.4% 3.0% 1.9% 4.5% 4.1%
0.3% 0.0% -0.2% -0.4% 0.1% 0.0% 0.4% -0.3% 3.2% 1.2%
2011 ENERGY CONFERENCE
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Market Stats
Companies El Paso Corp Energen EQT Corp. MDU Resources National Fuel Gas Questar Corp* Williams Group Average Ticker EP EGN EQT MDU NFG STR WMB Action MO MO MO MP MO MO MO Target Price $21 $66 $53 $24 $78 $20 $41 % Upside to Target 19% 7% 12% 7% 10% 13% 35% 14.7% Avg Vol (000's) 10,894 971 2,097 1,437 618 3,341 9,788 4,164 Shares Out (mm) 706.0 72.1 149.2 188.4 83.4 178.8 594.2 MC (mm) $12,447 $4,435 $7,085 $4,216 $5,916 $3,090 $18,098 $7,898 EV (mm) $26,106 $5,128 $9,088 $5,536 $6,906 $4,390 $26,411 $11,938 Debt-toCap % 84.2% 24.9% 39.4% 36.2% 37.9% 56.1% 58.9% 48.2% Net Debt $13,659 $693 $2,003 $1,320 $990 $1,301 $8,313 Dividend $0.04 $0.54 $0.88 $0.65 $1.38 $0.61 $0.50 Yield 0.2% 0.9% 1.9% 2.9% 1.9% 3.5% 1.6% 1.9%
Valuation
C om panies El Paso Corp Energen Equitable Resources MDU Resources National Fuel Gas Questar Williams Group Average Tick er EP EGN EQT MDU NFG STR WMB HW EPS Estim ates 2011E 2012E 2013E $1.03 $1.30 $1.49 $3.53 $3.67 $4.97 $1.80 $2.19 $2.92 $1.33 $1.40 $1.52 $2.69 $2.93 $3.38 $1.13 $1.20 $1.27 $1.50 $1.55 na C onsensus Estim ates 2011 2012 2013 $1.03 $1.20 $1.32 $3.74 $3.96 $4.86 $1.82 $2.32 $2.81 $1.33 $1.47 $1.56 $2.63 $2.98 $3.35 $1.12 $1.19 $1.28 $1.33 $1.60 $2.04 P/E based on HW Estim ates HW C F Estim ates P/C F based on HW Estim ates 2011 2012 2013 20 1 1 E 2012E 2013E 2011 2012 2013 17.2x 13.6x 11.8x $2.84 $3.41 $3.70 6.2x 5.2x 4.8x 17.4x 16.8x 12.4x $9.32 $9.97 $12.02 6.6x 6.2x 5.1x 26.4x 21.7x 16.3x $4.92 $5.76 $6.92 9.7x 8.2x 6.9x 16.9x 16.0x 14.7x $3.52 $3.66 $3.93 6.4x 6.1x 5.7x 26.4x 24.2x 21.0x $7.02 $7.94 $9.14 10.1x 8.9x 7.8x 15.3x 14.5x 13.6x $2.30 $2.43 $2.56 7.5x 7.1x 6.7x 20.3x 19.7x na $4.99 $5.42 na 6.1x 5.6x na 2 0 .0 x 1 8 .0 x 1 5 .0 x 7 .5 x 6 .8 x 6 .2 x
C om panies El Paso Corp Energen Equitable Resources MDU Resources National Fuel Gas Questar Williams Group Average
Tick er EP EGN EQT MDU NFG STR WMB
EV/EBITDA 2011E 2012E 8.0x 7.2x 7.1x 6.6x 10.6x 8.7x 6.8x 6.4x 10.1x 8.7x 8.3x 7.9x 6.9x 6.4x 8 .3 x 7 .4 x
ROC E E& P Valuation 2011E 2012E EBITDA M cfe 8.6% 9.3% 3.3x $1.31 9.2% 8.7% 6.3x $2.21 7.2% 8.5% 9.0x $1.10 7.2% 7.5% 3.6x $1.65 9.4% 10.0% 9.2x $6.32 11.3% 12.1% na na 10.2% 10.1% 6.6x $2.16 9 .0 % 9 .5 % 6 .3 x $ 2 .4 6
2011 ENERGY CONFERENCE 16
Basic Definitions
E&P Terminology: Basis - The difference between the futures price for a commodity and the corresponding cash spot price. This commonly is related to factors such as product quality, location and contract pricing. Basin-Specific - The difference between the futures price for a commodity and the corresponding cash spot price. This commonly is related to factors such as product quality, location and contract pricing. Behind Pipe Reserves - Oil or gas reserves located above or below the currently producing zone(s) that cannot be extracted until a recompletion or pay-add occurs. BTU – Short for British thermal unit, it’s the amount of energy required to heat one pound of water one degree Fahrenheit. There are approximately 1,030 BTUs in a cubic foot of natural gas. Cash Flow Hedge - The designation of a derivative instrument to reduce exposure to variability in cash flows from the forecasted sale of oil, gas or natural gas liquids production whereby the gains (losses) on the derivative transaction are anticipated to offset the losses (gains) on the forecasted sale. Collar - A financial arrangement that effectively establishes a price range between a floor and a ceiling for the underlying commodity. The purchaser bears the risk of fluctuation between the minimum (or floor) price and the maximum (or ceiling) price. Development Costs - Costs necessary to gain access to, prepare and equip development wells in areas of proved reserves. Development Well - A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. Downspacing - An increase in the number of available drilling locations as a result of a regulatory commission order. Dry Well - An exploratory or a development well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well. Exploration Expenses - Costs primarily associated with drilling unsuccessful exploratory wells in undeveloped properties, exploratory geological and geophysical activities, and costs of impaired and expired leaseholds. Exploratory Well - A well drilled to find and produce oil or gas in an unproved area, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir. Long-Lived Reserves - Reserves generally considered to have a productive life of approximately 10 years or more, as measured by the reserves-to-production ratio. MCFE - The quantity of natural gas occupying a volume of one thousand cubic feet at a temperature of sixty degrees Fahrenheit and at a pressure of fourteen and seventy-three hundredths pounds per square inch absolute; a unit of measure in the oil and gas industry for natural gas. Net Well or Acre - A net well or acre is deemed to exist when the sum of fractional ownership working interests in gross wells or acres equals one. Pay-Add - An operation within a currently producing wellbore that attempts to access and complete an additional pay zone(s) while maintaining production from the existing completed zone(s). Pay Zone - The formation from which oil and gas is produced. Production (Lifting) Costs - Costs incurred to operate and maintain wells. Productive Well - An exploratory or a development well that is not a dry well. Proved Developed Reserves - The portion of proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. Proved Reserves - Estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved Undeveloped Reserves (PUD) - The portion of proved reserves which can be expected to be recovered from new wells on undrilled proved acreage or from existing wells where a relatively major expenditure is required for completion. Recompletion - An operation within an existing wellbore whereby a completion in one pay zone is abandoned in order to attempt a completion in a different pay zone. Reserves-to-Production Ratio - Ratio expressing years of supply determined by dividing the remaining recoverable reserves at year end by actual annual production volumes. The reserve-to-production ratio is a statistical indicator with certain limitations, including predictive value. The ratio varies over time as changes occur in production levels and remaining recoverable reserves. Secondary Recovery - The process of injecting water, gas, etc., into a formation in order to produce additional oil otherwise unobtainable by initial recovery efforts. Service Well - A well employed for the introduction into an underground stratum of water, gas or other fluid under pressure or disposal of salt water produced with oil or other waste. Sidetrack Well - A new section of wellbore drilled from an existing well. Working Interest - Ownership interest in the oil and gas properties that is burdened with the cost of development and operation of the property. Other Energy Terminology: Fee-Based Contracts – Gas is gathered, treated and processed for a fixed fee. Fees typically take form in either a demand payment or a volumetric payment. Keep-Whole Contracts – Contract structure where the processor takes title to the NGLs removed from the natural gas stream and compensates (“keeps whole”) the producer for the equivalent amount of Btus removed from the stream. Liquefied Natural Gas (LNG) - Natural gas that is liquefied by reducing the temperature to negative 260 degrees Fahrenheit. LNG typically is used to supplement traditional natural gas supplies during periods of peak demand. Natural Gas Liquids (NGL) - Liquid hydrocarbons that are extracted and separated from the natural gas stream. NGL products include ethane, propane, butane, natural gasoline and other hydrocarbons. Percent of Proceeds Contracts – Contract structure where the processor retains a percentage of the outlet stream, either in the form of liquids or gas or a combination. Transportation - Moving gas through pipelines on a contract basis for others. Throughput - Total volumes of natural gas sold or transported by the gas utility.
2011 ENERGY CONFERENCE
17
Analyst Certification
We, Abigail Mayo and Holly Stewart, certify that the views expressed in this research report accurately reflect our personal views about the subject securities or issuers; and we, Abigail Mayo and Holly Stewart, certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report.
Important Disclosures
This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider Howard Weil’s research and/or ratings as only a single factor in making their investment decisions. Past performance of the financial instruments recommended in this report should not be taken as an indication or guarantee of future results. Howard Weil Incorporated is a multidisciplined financial services firm that regularly intends to seek investment banking business with companies covered in its research reports, and thereby seeks to receive compensation from these companies for services including, but not limited to, acting as an underwriter in an offering or financial advisor in a merger or acquisition, or serving as a placement agent for private transactions. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. For applicable current disclosures for all covered companies please write to the Howard Weil Research Department at the following address: Howard Weil Incorporated Research Department 1100 Poydras Street, Suite 3500 New Orleans, Louisiana 70163
Guide to Howard Weil’s Equity Research Rating System
Howard Weil analysts use a relative rating system in which they determine a rating for stocks in Howard Weil’s Natural Gas Hybrids sector by a stock’s return potential relative to the S&P 500. For purposes of the disclosures required by FINRA rules, Focus List Stock and Market Outperform equate to Buy, Market Perform equates to Hold and Market Underperform equates to Sell. Coverage universe, research and current price targets are available at www.howardweil.com, or contact your Howard Weil representative. .
Stock Rating System
Focus List Stock (FS): Represents analysts’ best ideas in the Market Outperform category; expected to significantly outperform the S&P 500 over the next 6 - 12 months. Market Outperform (MO): Expected to outperform the S&P 500 over the next 12 months. Market Perform (MP): Returns expected to be in line with the S&P 500 over the next 12 months. Market Underperform (MU): Returns expected to be below the S&P 500 over the next 12 months. Rating Suspended (RS): Howard Weil Incorporated Research has suspended the investment rating and price target, if any, for this stock, because of a reassignment of analyst(s) covering this sector. The previous investment rating and price target, if any, are no longer in effect for this stock at this time and should not be relied upon. As of 12/31/2010, Howard Weil has 111 companies in its coverage universe. Of the 111 securities under Howard Weil’s coverage universe, 111 carry a recommendation. The percentages referenced below are based upon the 111-rated securities in the Howard Weil coverage universe. 56% have been assigned a Focus List (FS) or Market Outperform (MO) rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating. Within the last 12 months, 8% of companies with this rating are investment banking clients of the Firm. 44% have been assigned a Market Perform (MP) rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating. Within the last 12 months, 14% of companies with this rating are investment banking clients of the Firm. 0% have been assigned a Market Underperform (MU) rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating. Within the last 12 months, 0% of companies with this rating are investment banking clients of the Firm.
2011 ENERGY CONFERENCE 18
Paul E. Pursley President Mary Alice Allen Energy Conference Coordinator Larry Benedetto Chief Compliance Officer
Valuation / Risk Factors (504) 582-2459 (504) 582-2545 (504) 582-2655
Valuation Method Used to Determine Price Target: Our current price targets for the Natural Gas Hybrids sector are based on a net asset value calculation determined by a sum of the parts analysis. This analysis is calculated by using appropriate multiples of forward EBITDA, as well as using a discounted cash flow (DCF) analysis of proven reserves. Unproven reserves are valued by estimating a development plan and assigning appropriate growth rates. Historical performance and other qualitative measure are also used in our determination of total value. Risk Factors Which May Impede the Achievement of the Price Target: (1) Industry fundamentals with respect to customer demand or product/service pricing could change and adversely impact expected revenues and earnings; (2) issues relating to major competitor or market shares or new product expectations could change investor attitudes toward the sector or the stock; (3) Unforeseen developments with respect to the management, financial condition or accounting polices or practices could alter the prospective valuation; or (4) external factors that affect the U.S. economy, interest rates, the U.S. dollar or major segments of the economy could alter investor confidence and investment prospects. Oil and Gas Prices and OPEC: Financial and operating performance for companies in the Energy industry are affected by absolute and relative changes in oil and gas prices, which are influenced by a multitude of regional, national and global factors. As such, future stock price performance may also be influenced by such factors associated with changes to fiscal and royalty regimes in countries where it operates, or might operate, the potential for geopolitical upheaval (given its global presence) and may face various technical and operational risks associated with the products and services it provides. Agreements among OPEC members, including production limitations, may also affect worldwide commodity prices and financial and operational performance for companies in the Energy industry.
Sales
Jason B. Adler Bennett H.H. Biever Gary H. Brewster Charles A. Caplinger, IV Jason R. Conway Martin R. de Laureal Lauren Geraghty Gordon B. Gsell, Jr. Cooper A. Manning Emily M. Morrison James J. Reiss Andrew B. Rosenberg William M. Russell (504) 582-2563 (504) 582-2558 (504) 582-2525 (504) 582-2557 (504) 582-2657 (504) 582-2566 (504) 582-2526 (713) 393-4549 (504) 582-2556 (504) 582-2533 (504) 582-2565 (504) 582-2561 (504) 582-2623
Analysts’ Compensation
The equity research analyst(s) responsible for the preparation of this report, receive compensation based upon various factors, including effectiveness of research recommendations, client feedback, competitive factors and overall firm revenues, which may include revenues from, among other business units, Institutional Equities and Investment Banking.
Additional Disclaimers and Disclosures
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Trading
William F. Brennan Kyle Graffagnini Julie A. Guarino James H. Lee, Jr. Blair F. Scanlon (504) 582-2612 (504) 582-2612 (504) 582-2612 (504) 582-2612 (504) 582-2612
Additional information is available upon request 03/2011 Howard Weil Incorporated Member FINRA Member SIPC 1100 Poydras Street, Suite 3500, New Orleans, LA 70163 1.800.322.3005
2011 ENERGY CONFERENCE
19
Company Overviews
Analyst Contacts:
Holly Stewart (713) 393-4512
Abigail Mayo (713) 393-4511
All relevant disclosures and certifications begin on Page 19 of this booklet.
Table of Contents
Alphabetical by Company El Paso Corporation........................................................ 4 Energen Corporation ...................................................... 5 EQT Corporation ............................................................ 6 MDU Resources Group, Inc. .......................................... 7 National Fuel Gas Company ......................................... 8 Questar Corporation....................................................... 9 Williams.......................................................................... 10 Company Statistics 2010 E&P Snapshot/E&P CAPEX Stand-Alone E&P Valuation ..................................... 12 Trading Valuations / Free Cash Flow .......................... 13 Hedging Detail ............................................................... 14 Recent Shale Positions .................................................. 15 Performance Summary................................................. 16 Market Stats / Valuation ............................................... 17 Basic Definitions ............................................................ 18
2011 ENERGY CONFERENCE
2
PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E&P Stats
2008A 2,326 -18.5% 74.9% 25.1% 271.6 -5.2% 87.5% 12.5% 8.6 2009A 2,549 9.6% 68.5% 31.5% 252.6 -7.0% 87.4% 12.6% 10.1 2010A 3,171 24.4% 61.7% 38.3% 262.8 4.0% 87.0% 13.0% 12.1 273.4 4.0% 84.8% 15.2% 13.5 2011E 3,700 16.7%
EP V alu ati on Sn ap shot
2010A EPSE $0.99 -26.7% $2.82 -9.5% 17.9x 6.3x 8.5x $1.31 % Change CFPSE % Change Trading m e tri cs P/E P/CF EV/EBITDA EV/Mcfe 17.2x 6.2x 8.0x 13.6x 5.2x 7.2x 11.8x 4.8x 6.7x 2011E $1.03 4.1% $2.84 0.8% 2012E $1.30 26.6% $3.41 20.2% 2013E $1.49 14.9% $3.70 8.4%
El Paso Corporation
www.elpaso.com
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio Costs Detail ($/mcfe) LOE Production taxes G&A F&D ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield
EP $17.63 $18.77 $10.17 $12,447 $26,106 706 $13,659 81.6% 0.2%
Standalo ne E& P busine ss
Management Douglas L. Foshee, Chairman & CEO John R. Sult, CFO Inv est or Relat ions C ont act Bruce Connery
Cap Ex Detail ($mm)
Pipeline Group Exploration & Production Corporate & Other To ta l 2010 $2,518 $1,330 $125 $ 3 ,9 7 3 2011E $1,700 $1,300 $200 $ 3 ,2 0 0 % C ha nge -32.5% -2.3% 60.0% -1 9 .5 %
713-420-5855
$0.90 $0.44 $0.59 $36.83
$0.77 $0.22 $0.77 $2.12
$0.72 $0.27 $0.72 $1.41
$0.79 $0.28 $0.75 $1.58
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $489 $13,517 $3,167
E&P
RESERVES BY REGION
2010 Proved Reserves
Brazil 3% Central U.S. 42%
2010A EB IT b y Segmen t
2011E EB IT by Segment
Marketing, Trading & Other 1% 30% E&P 28%
Marketing, Trading & Other 3%
81.0% 81.6% 81.2% $347 $3,550 $1,900
Gulf Coast 20%
Pipelines 69% Pipelines 69%
Western U.S. 35%
COMPANY PROFILE
El Paso Corp. operates natural gas pipeline and storage facilities, transports natural gas, and imports liquefied natural gas. The Company has interests in approximately 43k miles of interstate pipeline which is considered North America's largest interstate natural gas pipeline system. El Paso also operates in the exploration and production business, housing over 3 Tcfe of oil and gas reserves. El Paso is a top 25 U.S. natural gas producer in terms of production volume.
Nat ural G as Transmission El Paso's pipeline system handles ~30% of the daily throughput (19 Bcf/d) of natural gas from North America's major producing basins. The Company is the majority interest owner in eight major pipeline systems and partially owns two systems. El Paso plans to complete $8b of backlog projects by the end of 2011, including Ruby Pipeline. El Paso's MLP, El Paso Pipeline Partners, owns a 100% stake in both WIC and Elba Express, along with a 58% stake in CIG and an 82% stake in SNG. El Paso owns the 2% general partnership interest and +45% of the outstanding limited partnership units. Explorat ion and Product ion El Paso's E&P company finds, develops, and produces natural gas, oil, and NGLs in the U.S., Brazil and Egypt. During 2010, El Paso continued to focus on its more unconventional resources through its four core programs: the Haynesville Shale in northwest Louisiana and east Texas, the Eagle Ford Shale in south Texas, the Altamont field in Utah and the Wolfcamp Shale oil play in the Permian Basin of West Texas.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E& P Stats
2008A 1,584 -9.7% 83.9% 16.1% 102.4 3.8% 66.0% 34.0% 15.5 2009A 1,547 -2.4% 83.4% 16.6% 111.2 8.7% 65.0% 35.0% 13.9 2010A 1,818 17.5% 76.5% 23.5% 113.0 1.6% 62.8% 37.2% 16.1 122.5 8.4% 58.5% 41.5% 15.7 2011E 1,918 5.5%
EGN V aluation Snap shot
2010A EPSE $4.38 23.2% $9.31 -1.5% 14.0x 6.6x 6.6x $2.21 % Change CFPSE
EG N $61.53 $63.52 $40.25 $4,435 $5,128 72 $693 24.9% 0.9%
2011E $3.53 -19.4% $9.32 0.1% 17.4x 6.6x 7.1x
2012E $3.67 3.9% $9.97 6.9% 16.8x 6.2x 6.6x
2013E $4.97 35.4% $12.02 20.6% 12.4x 5.1x 5.3x
Energen Corporation
www.energen.com
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio Costs Detail ($/mcfe) LOE Production taxes G&A F&D ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield
% Change Trading m e trics P/E P/CF EV/EBITDA Standa lo ne E& P busine ss EV/Mcfe (proved)
Management James T. McManus, II, Chairman & CEO Charles W. Porter, Jr., CFO Inv est or Relat ions C ont act Julie S. Ryland
Cap Ex Detail ($mm)
E&P Development E&P Acquisitions Utility To ta l 2010 $368 $409 $94 $871 2011E $664 $0 $75 $739 % C hange 80.4% -100.0% -19.8% -1 5 .1 %
205-326-2634
$1.70 $0.61 $0.45 ($7.28)
$1.63 $0.32 $0.56 $5.47
$1.61 $0.38 $0.52 $2.03
$1.68 $0.39 $0.52 $2.97
S hare Repurchase S napshot (shares in millions) Authorized 12.6 Remaining 9.0
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $310 $405 $2,154 15.8% 24.9% 24.3% $23 $1,019 $714
RESERVES BY REGION
2010 Proved Reserves
North LA / East TX 2% Black Warrior Basin 9% San Juan Basin 45%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Natural Gas Natural Gas Distribution 17% Distribution 20%
Exploration & Production 83% Exploration & Production 80%
Permian Basin 44%
COMPANY PROFILE
Energen Corporation, a diversified energy holding company, engages in the acquisition, development, exploration, and production of oil, natural gas, and NGLs in the continental United States. Energen also purchases, distributes, and sells natural gas to residential, commercial, and industrial customers in central and north Alabama. The Company's two principal subsidiaries are Energen Resources Corporation and Alabama Gas Corporation (Alagasco).
Oil and Gas Operat ions Energen Resources' proved oil and gas reserves at the end of 2010 totaled 1.8 Tcfe. Nearly all of these reserves are located in either the San Juan Basin in New Mexico and Colorado, the Permian Basin in west Texas, or the Black Warrior Basin in Alabama. Of the Company's year end reserves, natural gas represents approximately 53%, oil represents 34% and NGLs make up the balance. Energen completed four Permian Basin acquisitions in 2010, totaling $550mm, and plans to allocate more than 80% of 2011 drilling capital toward oil development in the Permian. Nat ural G as Dist ribut ion Alagasco is the largest natural gas distribution utility in the state of Alabama, serving approximately 445,000 homes, businesses and industries in north and central Alabama.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E&P Stats
2008A 3,110 15.9% 60.9% 39.1% 84.0 9.0% 92.3% 7.7% 37.0 2009A 4,068 30.8% 51.0% 49.0% 100.1 19.2% 90.9% 9.1% 40.6 2010A 5,220 28.3% 48.6% 51.4% 134.6 34.5% 91.7% 8.3% 38.8 173.9 29.2% 92.6% 7.4% 35.6 2011E 6,188 18.5%
EQT V alu ati on Snap sh ot
2010A 2011E $1.80 14.0% $4.92 -9.5% 26.4x 9.7x 10.6x 2012E $2.19 21.8% $5.76 17.1% 21.7x 8.2x 8.7x 2013E $2.92 33.4% $6.92 20.0% 16.3x 6.9x 7.0x EPSE % Change CFPSE
EQT $47.50 $49.76 $32.23 $7,085 $9,088 149 $2,003 39.4% 1.9%
EQT Corporation
www.eqt.com
$1.58 4.1% $5.44 -1.5% 30.1x 8.7x 12.0x $1.10
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio Costs Detail ($/mcfe) LOE Production taxes G&A F&D ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management David L. Porges, President & CEO Philip P. Conti, CFO Inv est or Relat ions C ont act Patrick J. Kane, CFA
% Change Tra ding m e trics P/E P/CF EV/EBITDA EV/Mcfe (proved)
Sta nda lo ne E& P busine ss
Cap Ex Detail ( $mm)
Production Midstream Distribution To tal 2010 $1,246 $193 $39 $ 1 ,4 7 8 2011E $691 $244 $35 $970 % C ha nge -44.5% 26.4% -10.3% -3 4 .4 %
412-553-7833
$0.35 $0.52 $0.38 $1.32
$0.30 $0.29 $0.35 $0.66
$0.24 $0.24 $0.41 $0.97
$0.25 $0.24 $0.39 $0.61
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $60 $1,943 $3,079 38.7% 39.4% 39.4% $0 $1,500 $1,423
RESERVES BY REGION
2010 Proved Reserves
Coalbed Methane 3%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Other Distribution 16% 3% Production 45% Distribution 14% Other 5% Production 43%
Huron/Berea 42%
Midstream 36%
Midstream 38%
Marcellus 55%
COMPANY PROFILE
EQT Corporation operates as an integrated energy company with emphasis on Appalachian area natural gas supply, transmission, and distribution. EQT breaks down into three segments: EQT Production, EQT Midstream and EQT Distribution. The Company is nearly 100% natural gas, with a focus on shale, tight sands and coal bed methane.
EQT Product ion As one of the largest operators in the Appalachian Basin, EQT controls 3.5 million acres across three major plays: Marcellus Shale, Huron Shale and CBM. As of December 31, 2010, EQT's proven reserves of 5.2 Tcfe grew ~30% for the second consecutive year. EQT Midst ream EQT Midstream provides gathering, transmission and storage services for the Company's produced gas as well as to other independent Appalachian third parties. EQT Midstream has +11,400 miles of gathering and transmission lines and also owns 63 Bcf of underground storage capacity. In February 2011, EQT sold its gas processing facility in Langley, Kentucky, as well as the associated NGL pipeline for $230mm. EQT Dist ribut ion Equitable Gas Company distributes and sells natural gas to ~277k customers (93% are residential customers and the remaining are commercial and industrial customers) in southwestern Pennsylvania, West Virginia and eastern Kentucky.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E&P Stats
2008A 810 14.6% 73.1% 26.9% 82.3 6.9% 79.5% 20.5% 9.8 2009A 654 -19.3% 73.8% 26.2% 75.3 -8.5% 75.2% 24.8% 8.7 2010A 646 -1.2% 76.6% 23.4% 70.0 -7.1% 72.0% 28.0% 9.2 68.4 -2.2% 69.2% 30.8% 9.6 2011E 653 1.2%
MDU V aluation Snap shot
2010A EPSE $1.30 -7.1% $2.93 -35.8% 17.2x 7.6x 7.1x $1.65 % Change CFPSE % Change Trading m e trics P/E P/CF EV/EBITDA EV/Mcfe (proved) 16.9x 6.4x 6.8x 16.0x 6.1x 6.4x 14.7x 5.7x 5.9x 2011E $1.33 1.7% $3.52 20.2% 2012E $1.40 5.6% $3.66 3.8% 2013E $1.52 8.7% $3.93 7.3%
MDU Resources Group, Inc.
www.mdu.com
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management Terry D. Hildestad, President & CEO Doran N. Schwartz, CFO Inv est or Relat ions C ont act Phyllis A. Rittenbach
MD U $22.38 $22.90 $17.11 $4,216 $5,536 188 $1,320 36.2% 2.9%
Standalo ne E& P busine ss
Cap Ex Detail ($mm)
Electric Utility Gas Distribution Pipeline & Energy Services Construction Services Construction & Mining Oil and Gas Prod. To ta l 2010 $86 $75 $14 $15 $26 $356 $572 2011E $76 $80 $41 $10 $39 $306 $552 % C hange -11.6% 6.7% 192.9% -33.3% 50.0% -14.0% -3 .5 %
701-530-1057
Costs Detail ($/mcfe) LOE Production taxes G&A F&D ($/mcfe)
$1.00 $0.66 $0.30 $3.79
$0.93 $0.39 $0.32 ($2.22)
$0.98 $0.51 $0.34 $5.72
$1.00 $0.52 $0.35 $4.01
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $93 $1,434 $2,693 34.7% 36.2% 32.6% $222 $765 $610
E&P 33%
RESERVES BY REGION
2010 Proved Reserves
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Electric 1 1 %
Natural Gas 1 7%
E&P 30%
Electric 1 1 %
Natural Gas 1 7%
Mid-Con/Gulf States 26%
Construction & Mining 1 4%
Pipeline & Energy Services 1 7%
Construction Services 8%
Construction & Mining 1 6%
Pipeline & Energy Services 1 7%
Construction Services 9%
Rockies 74%
COMPANY PROFILE
MDU Resources Group, Inc. operates as an integrated energy company, comprised of both regulated and unregulated business. The Company consists of six operating segments: Exploration & Production, Gas & Electric Utilities, Pipeline and Energy Services, Construction Materials and Construction Services.
Nat ural G as & Oil Product ion MDU's E&P company, Fidelity Exploration & Production, develops natural gas and oil reserves in the U.S. Fidelity operates in the Rocky Mountains and the Mid-Continent/Gulf States. As of year-end 2010, MDU had ~645 Bcfe of proven reserves (69% nat gas/ 31% oil). During 2010, MDU acquired undeveloped acreage in the Niobrara play (65k net acres) in WY and expanded its acreage position in the ND Bakken play (66k net acres). Pipeline & Energy S erv ices MDU provides natural gas transportation, underground storage and gathering services through regulated and nonregulated pipeline systems primarily in the Rockies and the northern Great Plains region of the U.S. C onst ruct ion Mat erials & S ervices MDU's Construction Materials business, Knife River Corporation, is a top 10 U.S. aggregate producer with total reserves of 1.1b tons. Product lines include crushed stone, sand and gravel, asphalt, ready-mix concrete, building materials, and liquid asphalt production. MDU's Construction Services Group provides various construction activities, such as constructing and maintaining electric and communication lines, fire protection systems, and external lighting and traffic signalization equipment. This group expanded into new markets during 2010, including solar and wastewater work as well as utility excavation services. G as & Elect ric Ut ilit ies MDU's gas & electric distribution segment provides generation, transmission, and distribution of energy across eight states through four companies: Montana-Dakota Utilities Co., Great Plains Natural Gas Co., Cascade Natural Gas Co. and Intermountain Gas Corporation. MDU serves 960k gas and electric customers across eight states.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E& P Stats
2008A 503 2.5% 86.6% 13.4% 40.8 3.7% 54.8% 45.2% 12.3 2009A 528 5.0% 83.5% 16.5% 42.5 4.3% 52.4% 47.6% 12.4 2010A 700 32.4% 74.6% 25.4% 49.7 16.8% 61.1% 38.9% 14.1 69.9 40.8% 72.8% 27.2% 12.9 2011E 902 28.9%
N FG V aluation Snap sh ot
2010A EPSE $2.65 1.4% $5.56 -26.4% 26.8x 12.8x 10.8x $6.32 % Change CFPSE
NF G $70.92 $73.66 $42.83 $5,916 $6,906 83 $990 37.9% 1.9%
2011E $2.69 1.5% $7.02 26.2% 26.4x 10.1x 10.1x
2012E $2.93 8.9% $7.94 13.2% 24.2x 8.9x 8.7x
2013E $3.38 15.4% $9.14 15.1% 21.0x 7.8x 7.3x
National Fuel Gas Company
www.nationalfuelgas.com
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change Natural gas % Oil/liquids % R/P ratio Costs Detail ($/mcfe) LOE & Prod. Taxes G&A F&D ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management David F. Smith, Chairman & CEO Ronald J. Tanski, President & COO Inv est or Relat ions C ont act Timothy Silverstein
% Change Tra ding m e trics P/E P/CF EV/EBITDA EV/Mcfe
Sta nda lo ne E& P busine ss
Cap Ex Detail ( $mm)
Utility Pipeline & Storage E&P Corporate & Other To tal 2010 $58 $38 $398 $7 $501 2011E $58 $125 $628 $28 $838 % C ha nge -0.8% 229.9% 57.6% 276.1% 6 7 .0 %
$1.64 $0.60 $3.06
$1.47 $0.69 $3.07
$1.24 $0.64 $1.77
$1.23 $0.67 $2.45
716-857-6987
S hare Repurchase S napshot (shares in millions) Authorized 8.0 Remaining 7.0
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $171 $899 $1,755 33.9% 37.9% 36.1% $80 $705 $705
RESERVES BY REGION
2010 Proved Reserves
Gulf 5%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Energy Mkt. & Other 2% Utility 29%
Energy Mkt. & Other 1% Utility 28%
Appalachia 47%
E&P 50% Pipeline & Storage 19%
E&P 54%
Pipeline & Storage 17%
West Coast 48%
COMPANY PROFILE
National Fuel Gas Company operates as a diversified energy company in several segments of the natural gas industry, including utility, pipeline and storage, exploration and production, and marketing operations. Both its regulated and unregulated businesses have a Northeast focus.
Explorat ion & Product ion Seneca Resources Corporation explores, develops, and purchases natural gas and oil reserves in the Appalachian region and California. The Company recently announced the sale of its shallow water Gulf of Mexico producing assets for $70mm, officially exiting the GOM. Seneca ended 2010 with 700 Bcfe of proved reserves (a +30% y/y increase). Pipeline & S t orage National Fuel Gas Supply Corp. and Empire Pipeline, Inc. provide natural gas transportation and storage services to companies through an integrated system of ~3,000 miles of pipeline and 31 natural gas storage fields. The Company has several new pipeline projects in various stages that will help bring Appalachian gas to market. These projects include: Tioga County Extension Project, Line N Expansion Project, Northern Access Project and West to East Overbeck to Leidy Project. Ut ilit y National Fuel's utility segment, National Fuel Gas Distribution Corporation, sells and transports natural gas to nearly 732k customers in western New York and northwestern Pennsylvania.
2011 ENERGY CONFERENCE
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PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
STR V aluati on Sn ap sh ot
2010A 2011E $1.13 -0.3% $2.30 16.8% 15.3x 7.5x 8.3x 2012E $1.20 6.1% $2.43 5.5% 14.5x 7.1x 7.9x 2013E $1.27 6.0% $2.56 5.5% 13.6x 6.7x 7.3x EPSE % Change CFPSE % Change Tra ding m e trics P/E P/CF EV/EBITDA 15.3x 8.8x 8.6x $1.13 10.3% $1.97 -18.9%
Wexp ro Stats
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change R/P ratio Investment Base ($mm) % change Return on Investment Capital Expenditures ($mm) 2008A 674 5.0% 72.7% 27.3% 48.5 29.7% 13.9 $411 36.7% 18.0% $144 2009A 676 0.4% 73.3% 26.7% 50.6 4.3% 13.4 $432 5.2% 18.7% $116 2010A 768 13.5% 62.9% 37.1% 52.6 4.0% 14.6 $457 5.7% 19.3% $91
Questar Corporation
www.questar.com
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management Ronald W. Jibson, President & CEO Kevin W. Hadlock, CFO
S TR $17.28 $18.30 $13.56 $3,090 $4,390 179 $1,301 56.1% 3.5%
Cap Ex Detail ($mm)
Wexpro Questar Pipeline Questar Gas To tal 2010 $91 $122 $109 $321 2011E $100 $105 $132 $337 % C ha nge 10.4% -13.7% 21.5% 5 .0 %
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $424 $899 $1,036 46.4% 56.1% 55.7% $22 $600 $358
RESERVES BY REGION
2010 Proved Reserves
Utah 11% Other 1%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Questar Pipeline 37%
Wexpro 38%
Questar Pipeline 37%
Wexpro 38%
Colorado 20%
Questar Gas 25%
Questar Gas 25%
Wyoming 68%
COMPANY PROFILE
Questar Corporatiom is an integrated energy company with three lines of business including retail gas distribution, interstate gas transportation and storage and gas development and production. Questar spun off its unregulated E&P and Midstream businesses last year, leaving the regulated assets at Questar Corp. Wexpro As Questar's "crown jewel", Wexpro develops and produces gas reserves and provides cost of service gas to Questar's utility, Questar Gas. Wexpro is allowed a guaranteed after-tax rate of return of 19-20% on its investment base. Wexpro produced 50 bcf of gas during 2010 and finished the year with an investment base of $457mm. Wexpro has over 900 risked locations yet to drill, equating to $1.4b of potential future investment. Quest ar Pipeline Questar Pipeline provides natural gas transportation and underground storage services in the Rocky Mountain Region. Questar Pipeline, along with its subsidiaries, owns 2,568 miles of interstate pipeline with total firm capacity commitments of 4,744 Mdth per day. Quest ar G as Questar's utility company, Questar Gas, distributes natural gas in Utah, southwestern Wyoming, and a small portion of southeastern Idaho. In 2010, Questar Gas generated ~25% of Questar's operating income and currently serves nearly 910k sales and transportation customers.
2011 ENERGY CONFERENCE
8
PERFORMANCE & CAPEX BREAKDOWN
INCORPORATED
MEMBER NASD/MEMBER SI PC
E&P BREAKDOWN
E& P Stats
2008A 4,339 4.7% 56.6% 43.4% 418.7 19.2% 10.4 2009A 4,255 -1.9% 56.1% 43.9% 451.2 7.8% 9.4 2010A 4,272 0.4% 58.5% 41.5% 432.6 -4.1% 9.9 466.2 7.8% 9.7 2011E 4,507 5.5%
WMB V alu ati on Snap sh ot
2010A EPSE % Change CFPSE
WMB $30.46 $31.00 $17.53 $18,098 $26,411 594 $8,313 55.6% 1.6%
2011E $1.50 17.1% $4.99 11.5% 20.3x 6.1x 6.9x
2012E $1.55 3.2% $5.42 8.8% 19.7x 5.6x 6.4x
Williams
www.williams.com
$1.28 36.9% $4.47 2.5% 23.8x 6.8x 7.8x $2.16
Reserves (bcfe) % change % PDP % PUD Production volumes (bcfe) % change R/P ratio Costs Detail ($/mcfe) LOE Production taxes G&A F&D, ex acquisition ($/mcfe)
Tick er Price ($/sh, as of 3/23/11) 52-week high ($/sh) 52-week low ($/sh) Market Cap ($mm) Enterprise Value ($mm) Shares Out (mm) Net debt ($mm) Debt-to-cap Yield Management Alan S. Armstrong, President & CEO Don R. Chappel, CFO Inv est or Relat ions C ont act Travis Campbell
% Change Tra ding m e trics P/E P/CF EV/EBITDA Sta nda lo ne E& P busine ss EV/Mcfe
Cap Ex Detai l ($mm)
Williams Partners (WPZ) E&P Other To ta l 2010 $837 $1,839 $112 $ 2 ,7 8 8 2011E $1,743 $1,450 $430 $ 3 ,6 2 3 % C ha nge 108.2% -21.2% 283.9% 2 9 .9 %
$0.66 $0.60 $0.43 $3.04
$0.60 $0.18 $0.41 $4.84
$0.66 $0.34 $0.43 $3.67
$0.60 $0.32 $0.42 $2.13
918-573-2944
S hare Repurchase S napshot (shares in millions) Authorized n/a Remaining n/a
BUSINESS SEGMENT BREAKDOWN CAPITAL BREAKDOWN
as of 12/31/2010 ($mm) Short-term Debt Long-term Debt Shareholder Equity LT Debt / Capital Total Debt / Capital Net Debt / Capital Cash Revolver Capacity Available Capacity $508 $8,600 $7,288 54.1% 55.6% 53.3% $795 $2,650 $2,650
RESERVES BY REGION
2010 Proved Reserves
Appalachia 1% Williston 3%
2010A EBIT b y Segmen t
2011E EBIT b y Segment
Corp. & Other E&P 18% 2%
E&P 15%
Corp. & Other 2%
Fort Worth 5% San Juan 13%
Other 2%
Powder River 8%
WPZ 80% WPZ 83%
Piceance 68%
COMPANY PROFILE
Williams (WMB) engages in the exploration & production, gathering & processing, and transportation of natural gas. Williams operates through the following business segments: its MLP, Williams Partners (WPZ), Exploration and Production, and Other. In February 2011, WMB announced its plan to separate the E&P business into a standalone, publicly traded company via an IPO of up to 20% of Williams' interest in 3Q'11. The IPO will be followed by a tax-free spin of the remaining ownership in 2012. Williams will ultimately own its GP and LP interest in WPZ, a domestic olefins business and a Canadian midstream business.
Explorat ion & Product ion Williams E&P business includes natural gas and oil development, production and gas marketing activities primarily in the Rocky Mountain, Northeast and Mid-Continent regions of the U.S. The Company ended 2010 with 4.3 Tcfe of proved reserves, of which 97% were natural gas. Williams remains a top 10 U.S. natural gas producer. Williams Part ners L. P. (WPZ) Gas Pipeline: Williams operates approximately 13,900 miles of interstate natural gas pipelines, with design capacity of more than 13 MMdt per day. The Company operates three natural gas pipelines (Transco, Northwest Pipeline and Gulfstream) that deliver approximately 12% of the natural gas consumed in the U.S. WPZ owns 24.5% interest in Gulfstream pipeline, and a 25.5% interest is retained by WMB. Midstream: Primary businesses include natural gas gathering, treating and processing, NGL fractionation, storage and transportation, and oil transportation. WMB's midstream assets are concentrated in several major producing basins including CO, NM, WY, the GOM and the Marcellus Shale in PA.
2011 ENERGY CONFERENCE
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2011 ENERGY CONFERENCE 10
2010 E&P Snapshot
Hybrid Group - 2 0 1 0 E& P Snapshot EP EGN EQT M DU Production H ig hlig hts Total production (bcfe) y/y % total production growth y/y % gas production growth y/y % oil production growth % gas component % oil/liquids component Realized Gas Price ($/mcf) Realized Oil Price ($/bbl) Reserve H ig hlig hts Total Reserves (bcfe) % change % PDP % PUD Reserve Life Capital Spending H ig hlig hts Development ($mm) Exploration ($mm) Acquisitions ($mm) Total Capital ($mm) Total F&D Costs ($/mcfe) F&D Costs (ex acquisition) 263 4% 3% 6% 87% 13% $5.67 $64.50 3,171 24% 62% 38% 12.1 $276 600 320 $1,196 $1.41 $1.11 113 2% -2% 9% 63% 37% $6.82 $78.86 1,818 17% 77% 23% 16.1 $333 37 409 $779 $2.03 $1.61 135 34% 36% 22% 92% 8% $3.93 $70.42 5,220 28% 49% 51% 38.8 $881 5 358 $1,244 $0.97 $0.69 70 -7% -11% 5% 72% 28% $4.36 $65.85 646 -1% 77% 23% 9.2 $140 33 182 $355 $5.72 nm NFG 50 17% 36% -5% 61% 39% $6.04 $75.25 700 32% 75% 25% 14.1 $234 75 81 $390 $1.77 $1.40 WMB 433 -4% -4% nm nm nm $5.23 n/a 4,272 0% 58% 42% 9.9 $988 22 1,731 $2,741 $6.27 $3.67
E&P CAPEX Detail
E&P Cap Ex Detail ($mm)
2009A $1,000 $427 $717 $183 $188 $1,434 $658 2010A $1,330 $777 $1,246 $356 $398 $1,839 $991 2011E $1,300 $664 $691 $306 $628 $1,450 $840 '1 1 vs. '1 0 % C hange -2% -15% -45% -14% 58% -21% -1 5 % -1 5 .3 % EP EGN * EQT M DU* * NFG WMB Average
* 2010 includes $409mm of acquisition capital (Permian Basin) and $368 of development capital ** 2010 includes ~$100mm for Green River Basin acquisition Source: Howard Weil & Companies
Stand-Alone E&P Valuation
Calculation of Enterprise Value for standalone E&P Business
Company EV Other segments Pipes Midstream Utility Other Total other segment EV Standalone E&P EV E&P EBITDA (2012) EV/ '1 2 EBITDA N et EV/ m cfe (proved) Net EV/ mcfe (3P)
Source: Howard Weil
EP $26,106 19,913 1,795 21,708 $4,398 $1,336 3 .3 x $ 1 .3 1 $0.51
EGN $5,128 1,116 1,116 $4,011 $640 6 .3 x $ 2 .2 1 $1.08
EQT $9,088 2,546 791 3,337 $5,750 $642 9 .0 x $ 1 .1 0 $0.62
M DU $5,536 917 1,716 1,835 4,469 $1,067 $298 3 .6 x $ 1 .6 5 $0.67
NFG $6,906 1,030 1,376 79 2,486 $4,420 $481 9 .2 x $ 6 .3 2 $0.34
WMB $26,411 0 0 17,231 17,231 $9,180 $1,381 6 .6 x $ 2 .1 6 $0.81
2011 ENERGY CONFERENCE
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Trading Valuations
Historical Valuations
(assum ing last 8 -y rs of trading ) C om panies EP EGN EQT MDU NFG STR WMB Group Avg P/E 14.8 x 12.3 x 19.2 x 14.1 x 15.9 x 15.5 x 19.7 x 1 5 .9 x P/C F 4.1 x 6.7 x 10.8 x 6.8 x 7.4 x 7.3 x 6.5 x 7 .1 x EV/EBITDA 6.9 x 5.9 x 9.5 x 6.3 x 7.2 x 7.3 x 7.0 x 7 .1 x
Current Valuations
(on 2 0 1 2 estim ates) P/E 13.6 x 16.8 x 21.7 x 16.0 x 24.2 x 14.5 x 19.7 x 1 8 .0 x P/C F 5.2 x 6.2 x 8.2 x 6.1 x 8.9 x 7.1 x 5.6 x 6 .8 x EV/EBITDA 7.2 x 6.6 x 8.7 x 6.4 x 8.7 x 7.9 x 6.4 x 7 .4 x
Source: Howard Weil & Thomson One
Free Cash Flow
N atural Gas Hybrids -- 2012E Free Cash Flow
C om panies El Paso Corp Energen Equitable Resources MDU Resources National Fuel Gas Questar Williams Gro up Ave rage
Source: Howard Weil
Tick e rs EP EGN EQT MDU NFG STR WMB
FFO $2,582 $725 $877 $706 $683 $440 $3,254
2012E C ap-e x ($2,680) ($751) ($1,061) ($701) ($789) ($336) ($3,495)
F ree -C F ($98) ($25) ($185) $5 ($106) $104 ($241)
F ree C F Y ie ld -0.7% -0.6% -2.6% 0.1% -1.7% 3.3% -1.3% -0 .5 %
C urrent N e t Debt C ash 84% $347 25% $23 39% $0 36% $222 38% $80 56% $22 58% $77 48% $110
2011 ENERGY CONFERENCE 12
Hedging Detail
Natural Gas Hybrids -- Hedging Detail
C om panies Tick ers El Paso C orp EP Gas Oil Energen EGN Gas Oil Equitable Resources EQT Gas Oil M DU Resources MDU Gas Oil N ational F uel Gas NFG Gas Oil W illiam s WMB Gas Oil Group Average Gas Position Group Average Oil Position
*Using an average of the last 4 years Source: Howard Weil
2011 % Price 71% 76% 73% 69% 42% $5.95 $86.06 $6.20 $78.10 $5.02
2012 % Price 41% 57% 55% 48% 20% $6.01 $91.31 $5.02 $82.34 $5.50
Historical Position (%)* 61% 38% 71% 75% 53%
46% 52% 52% 54% 53% 56% 63%
$5.31 $82.06 $6.24 $70.76 $5.25 $ 5 .6 6 $ 7 9 .2 5
15% 48% 24% 44% 29% 31% 50%
$5.62 $85.01 $6.42 $73.55 $5.07 $ 5 .6 1 $ 8 3 .0 5
45% 18% 59% 42% 49% 56% 43%
2011 ENERGY CONFERENCE
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Recent Shale Positions
Natural Gas Hybrids -- Shale Positions Gas Plays Oil Plays
C om panies El Paso Corp. Energen Corp. Tick ers EP EGN Shale Haynesville Eagle Ford Haynesville Marcellus Niobrara Huron* Marcellus Acreage (net) 46,000 68,000 12,000 200,000 55,500 2,700,000 520,000 Shale Wolfcamp Eagle Ford Avalon Wolfberry Niobrara Acreage (net) 138,000 102,000 80,000 26,300 54,000
Equitable Resources MDU Resources
EQT MDU
Bakken Niobrara Heath Marcellus Barnett Marcellus 745,000 Bakken 29,482 99,301
66,000 65,000 80,000 89,420
National Fuel Gas Williams
NFG WMB
*EQT includes the Lower Huron, Cleveland, Berea sandstone and other Devonian shales,
except the Marcellus, in its Huron play.
2011 ENERGY CONFERENCE 14
Performance Summary
Companies Natural Gas Hybrids El Paso Corp Energen Corp EQT Corp. MDU Resources National Fuel Gas Questar Corp Williams Group Average Indices SPX XNG E&P PIPES OSX UTY XOI AMZ Spot HHub Gas ($/Mcf) Spot WTI Crude ($/Bbl) Tick ers EP EGN EQT MDU NFG STR WMB 12/31/10 $13.76 $48.26 $44.84 $20.27 $65.62 $17.41 $24.72 Stock Price 3/18/11 3/23/11 $17.27 $61.17 $46.87 $21.90 $69.40 $17.04 $29.69 $17.63 $61.53 $47.50 $22.38 $70.92 $17.28 $30.46 Y TD 28.1% 27.5% 5.9% 10.4% 8.1% -0.7% 23.2% 14.6% % Change M TD WTD -5.2% 0.7% -3.7% 4.2% -2.7% -3.3% 0.3% -1.4% 2.1% 0.6% 1.3% 2.2% 2.2% 1.4% 2.6% 1.8% Today -0.6% -0.7% -0.3% -0.5% -0.6% -0.6% -0.1% -0.5% 52-Week Performance High Low $18.77 $63.52 $49.76 $22.90 $73.66 $18.30 $31.00 $10.17 $40.25 $32.23 $17.11 $42.83 $13.56 $17.53 Relative Perform ance YTD (bps) vs Group vs UTY vs XNG vs. S&P 1,348 1,285 (871) (424) (657) (1,539) 858 2,877 2,814 657 1,105 872 (10) 2,386 1,529 1,600 1,537 (620) (172) (405) (1,287) 1,109 252 2,495 2,432 276 724 490 (392) 2,005 1,147
SPX-UT XNG-P S15OILP BUSPIPE OSX-IND UTY-IND XOI-P AMZ-N
1,257.6 605.5 597.4 75.6 245.1 421.8 1,213.2 363.6 $4.23 $91.38
1,279.2 662.4 656.8 82.5 278.0 413.3 1,310.5 366.1 $4.00 $101.07
1,297.5 678.9 678.0 84.3 287.8 419.1 1,349.3 373.1 $4.18 $105.20
3.2% 12.1% 13.5% 11.5% 17.4% -0.6% 11.2% 2.6% -1.2% 15.1%
-2.2% 0.0% -0.1% -0.7% -0.7% -2.2% -1.2% -2.4% 6.6% 8.5%
1.4% 2.5% 3.2% 2.2% 3.5% 1.4% 3.0% 1.9% 4.5% 4.1%
0.3% 0.0% -0.2% -0.4% 0.1% 0.0% 0.4% -0.3% 3.2% 1.2%
2011 ENERGY CONFERENCE
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Market Stats
Companies El Paso Corp Energen EQT Corp. MDU Resources National Fuel Gas Questar Corp* Williams Group Average Ticker EP EGN EQT MDU NFG STR WMB Action MO MO MO MP MO MO MO Target Price $21 $66 $53 $24 $78 $20 $41 % Upside to Target 19% 7% 12% 7% 10% 13% 35% 14.7% Avg Vol (000's) 10,894 971 2,097 1,437 618 3,341 9,788 4,164 Shares Out (mm) 706.0 72.1 149.2 188.4 83.4 178.8 594.2 MC (mm) $12,447 $4,435 $7,085 $4,216 $5,916 $3,090 $18,098 $7,898 EV (mm) $26,106 $5,128 $9,088 $5,536 $6,906 $4,390 $26,411 $11,938 Debt-toCap % 84.2% 24.9% 39.4% 36.2% 37.9% 56.1% 58.9% 48.2% Net Debt $13,659 $693 $2,003 $1,320 $990 $1,301 $8,313 Dividend $0.04 $0.54 $0.88 $0.65 $1.38 $0.61 $0.50 Yield 0.2% 0.9% 1.9% 2.9% 1.9% 3.5% 1.6% 1.9%
Valuation
C om panies El Paso Corp Energen Equitable Resources MDU Resources National Fuel Gas Questar Williams Group Average Tick er EP EGN EQT MDU NFG STR WMB HW EPS Estim ates 2011E 2012E 2013E $1.03 $1.30 $1.49 $3.53 $3.67 $4.97 $1.80 $2.19 $2.92 $1.33 $1.40 $1.52 $2.69 $2.93 $3.38 $1.13 $1.20 $1.27 $1.50 $1.55 na C onsensus Estim ates 2011 2012 2013 $1.03 $1.20 $1.32 $3.74 $3.96 $4.86 $1.82 $2.32 $2.81 $1.33 $1.47 $1.56 $2.63 $2.98 $3.35 $1.12 $1.19 $1.28 $1.33 $1.60 $2.04 P/E based on HW Estim ates HW C F Estim ates P/C F based on HW Estim ates 2011 2012 2013 20 1 1 E 2012E 2013E 2011 2012 2013 17.2x 13.6x 11.8x $2.84 $3.41 $3.70 6.2x 5.2x 4.8x 17.4x 16.8x 12.4x $9.32 $9.97 $12.02 6.6x 6.2x 5.1x 26.4x 21.7x 16.3x $4.92 $5.76 $6.92 9.7x 8.2x 6.9x 16.9x 16.0x 14.7x $3.52 $3.66 $3.93 6.4x 6.1x 5.7x 26.4x 24.2x 21.0x $7.02 $7.94 $9.14 10.1x 8.9x 7.8x 15.3x 14.5x 13.6x $2.30 $2.43 $2.56 7.5x 7.1x 6.7x 20.3x 19.7x na $4.99 $5.42 na 6.1x 5.6x na 2 0 .0 x 1 8 .0 x 1 5 .0 x 7 .5 x 6 .8 x 6 .2 x
C om panies El Paso Corp Energen Equitable Resources MDU Resources National Fuel Gas Questar Williams Group Average
Tick er EP EGN EQT MDU NFG STR WMB
EV/EBITDA 2011E 2012E 8.0x 7.2x 7.1x 6.6x 10.6x 8.7x 6.8x 6.4x 10.1x 8.7x 8.3x 7.9x 6.9x 6.4x 8 .3 x 7 .4 x
ROC E E& P Valuation 2011E 2012E EBITDA M cfe 8.6% 9.3% 3.3x $1.31 9.2% 8.7% 6.3x $2.21 7.2% 8.5% 9.0x $1.10 7.2% 7.5% 3.6x $1.65 9.4% 10.0% 9.2x $6.32 11.3% 12.1% na na 10.2% 10.1% 6.6x $2.16 9 .0 % 9 .5 % 6 .3 x $ 2 .4 6
2011 ENERGY CONFERENCE 16
Basic Definitions
E&P Terminology: Basis - The difference between the futures price for a commodity and the corresponding cash spot price. This commonly is related to factors such as product quality, location and contract pricing. Basin-Specific - The difference between the futures price for a commodity and the corresponding cash spot price. This commonly is related to factors such as product quality, location and contract pricing. Behind Pipe Reserves - Oil or gas reserves located above or below the currently producing zone(s) that cannot be extracted until a recompletion or pay-add occurs. BTU – Short for British thermal unit, it’s the amount of energy required to heat one pound of water one degree Fahrenheit. There are approximately 1,030 BTUs in a cubic foot of natural gas. Cash Flow Hedge - The designation of a derivative instrument to reduce exposure to variability in cash flows from the forecasted sale of oil, gas or natural gas liquids production whereby the gains (losses) on the derivative transaction are anticipated to offset the losses (gains) on the forecasted sale. Collar - A financial arrangement that effectively establishes a price range between a floor and a ceiling for the underlying commodity. The purchaser bears the risk of fluctuation between the minimum (or floor) price and the maximum (or ceiling) price. Development Costs - Costs necessary to gain access to, prepare and equip development wells in areas of proved reserves. Development Well - A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. Downspacing - An increase in the number of available drilling locations as a result of a regulatory commission order. Dry Well - An exploratory or a development well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well. Exploration Expenses - Costs primarily associated with drilling unsuccessful exploratory wells in undeveloped properties, exploratory geological and geophysical activities, and costs of impaired and expired leaseholds. Exploratory Well - A well drilled to find and produce oil or gas in an unproved area, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir. Long-Lived Reserves - Reserves generally considered to have a productive life of approximately 10 years or more, as measured by the reserves-to-production ratio. MCFE - The quantity of natural gas occupying a volume of one thousand cubic feet at a temperature of sixty degrees Fahrenheit and at a pressure of fourteen and seventy-three hundredths pounds per square inch absolute; a unit of measure in the oil and gas industry for natural gas. Net Well or Acre - A net well or acre is deemed to exist when the sum of fractional ownership working interests in gross wells or acres equals one. Pay-Add - An operation within a currently producing wellbore that attempts to access and complete an additional pay zone(s) while maintaining production from the existing completed zone(s). Pay Zone - The formation from which oil and gas is produced. Production (Lifting) Costs - Costs incurred to operate and maintain wells. Productive Well - An exploratory or a development well that is not a dry well. Proved Developed Reserves - The portion of proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. Proved Reserves - Estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved Undeveloped Reserves (PUD) - The portion of proved reserves which can be expected to be recovered from new wells on undrilled proved acreage or from existing wells where a relatively major expenditure is required for completion. Recompletion - An operation within an existing wellbore whereby a completion in one pay zone is abandoned in order to attempt a completion in a different pay zone. Reserves-to-Production Ratio - Ratio expressing years of supply determined by dividing the remaining recoverable reserves at year end by actual annual production volumes. The reserve-to-production ratio is a statistical indicator with certain limitations, including predictive value. The ratio varies over time as changes occur in production levels and remaining recoverable reserves. Secondary Recovery - The process of injecting water, gas, etc., into a formation in order to produce additional oil otherwise unobtainable by initial recovery efforts. Service Well - A well employed for the introduction into an underground stratum of water, gas or other fluid under pressure or disposal of salt water produced with oil or other waste. Sidetrack Well - A new section of wellbore drilled from an existing well. Working Interest - Ownership interest in the oil and gas properties that is burdened with the cost of development and operation of the property. Other Energy Terminology: Fee-Based Contracts – Gas is gathered, treated and processed for a fixed fee. Fees typically take form in either a demand payment or a volumetric payment. Keep-Whole Contracts – Contract structure where the processor takes title to the NGLs removed from the natural gas stream and compensates (“keeps whole”) the producer for the equivalent amount of Btus removed from the stream. Liquefied Natural Gas (LNG) - Natural gas that is liquefied by reducing the temperature to negative 260 degrees Fahrenheit. LNG typically is used to supplement traditional natural gas supplies during periods of peak demand. Natural Gas Liquids (NGL) - Liquid hydrocarbons that are extracted and separated from the natural gas stream. NGL products include ethane, propane, butane, natural gasoline and other hydrocarbons. Percent of Proceeds Contracts – Contract structure where the processor retains a percentage of the outlet stream, either in the form of liquids or gas or a combination. Transportation - Moving gas through pipelines on a contract basis for others. Throughput - Total volumes of natural gas sold or transported by the gas utility.
2011 ENERGY CONFERENCE
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Analyst Certification
We, Abigail Mayo and Holly Stewart, certify that the views expressed in this research report accurately reflect our personal views about the subject securities or issuers; and we, Abigail Mayo and Holly Stewart, certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation or views contained in this research report.
Important Disclosures
This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider Howard Weil’s research and/or ratings as only a single factor in making their investment decisions. Past performance of the financial instruments recommended in this report should not be taken as an indication or guarantee of future results. Howard Weil Incorporated is a multidisciplined financial services firm that regularly intends to seek investment banking business with companies covered in its research reports, and thereby seeks to receive compensation from these companies for services including, but not limited to, acting as an underwriter in an offering or financial advisor in a merger or acquisition, or serving as a placement agent for private transactions. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. For applicable current disclosures for all covered companies please write to the Howard Weil Research Department at the following address: Howard Weil Incorporated Research Department 1100 Poydras Street, Suite 3500 New Orleans, Louisiana 70163
Guide to Howard Weil’s Equity Research Rating System
Howard Weil analysts use a relative rating system in which they determine a rating for stocks in Howard Weil’s Natural Gas Hybrids sector by a stock’s return potential relative to the S&P 500. For purposes of the disclosures required by FINRA rules, Focus List Stock and Market Outperform equate to Buy, Market Perform equates to Hold and Market Underperform equates to Sell. Coverage universe, research and current price targets are available at www.howardweil.com, or contact your Howard Weil representative. .
Stock Rating System
Focus List Stock (FS): Represents analysts’ best ideas in the Market Outperform category; expected to significantly outperform the S&P 500 over the next 6 - 12 months. Market Outperform (MO): Expected to outperform the S&P 500 over the next 12 months. Market Perform (MP): Returns expected to be in line with the S&P 500 over the next 12 months. Market Underperform (MU): Returns expected to be below the S&P 500 over the next 12 months. Rating Suspended (RS): Howard Weil Incorporated Research has suspended the investment rating and price target, if any, for this stock, because of a reassignment of analyst(s) covering this sector. The previous investment rating and price target, if any, are no longer in effect for this stock at this time and should not be relied upon. As of 12/31/2010, Howard Weil has 111 companies in its coverage universe. Of the 111 securities under Howard Weil’s coverage universe, 111 carry a recommendation. The percentages referenced below are based upon the 111-rated securities in the Howard Weil coverage universe. 56% have been assigned a Focus List (FS) or Market Outperform (MO) rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating. Within the last 12 months, 8% of companies with this rating are investment banking clients of the Firm. 44% have been assigned a Market Perform (MP) rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating. Within the last 12 months, 14% of companies with this rating are investment banking clients of the Firm. 0% have been assigned a Market Underperform (MU) rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating. Within the last 12 months, 0% of companies with this rating are investment banking clients of the Firm.
2011 ENERGY CONFERENCE 18
Paul E. Pursley President Mary Alice Allen Energy Conference Coordinator Larry Benedetto Chief Compliance Officer
Valuation / Risk Factors (504) 582-2459 (504) 582-2545 (504) 582-2655
Valuation Method Used to Determine Price Target: Our current price targets for the Natural Gas Hybrids sector are based on a net asset value calculation determined by a sum of the parts analysis. This analysis is calculated by using appropriate multiples of forward EBITDA, as well as using a discounted cash flow (DCF) analysis of proven reserves. Unproven reserves are valued by estimating a development plan and assigning appropriate growth rates. Historical performance and other qualitative measure are also used in our determination of total value. Risk Factors Which May Impede the Achievement of the Price Target: (1) Industry fundamentals with respect to customer demand or product/service pricing could change and adversely impact expected revenues and earnings; (2) issues relating to major competitor or market shares or new product expectations could change investor attitudes toward the sector or the stock; (3) Unforeseen developments with respect to the management, financial condition or accounting polices or practices could alter the prospective valuation; or (4) external factors that affect the U.S. economy, interest rates, the U.S. dollar or major segments of the economy could alter investor confidence and investment prospects. Oil and Gas Prices and OPEC: Financial and operating performance for companies in the Energy industry are affected by absolute and relative changes in oil and gas prices, which are influenced by a multitude of regional, national and global factors. As such, future stock price performance may also be influenced by such factors associated with changes to fiscal and royalty regimes in countries where it operates, or might operate, the potential for geopolitical upheaval (given its global presence) and may face various technical and operational risks associated with the products and services it provides. Agreements among OPEC members, including production limitations, may also affect worldwide commodity prices and financial and operational performance for companies in the Energy industry.
Sales
Jason B. Adler Bennett H.H. Biever Gary H. Brewster Charles A. Caplinger, IV Jason R. Conway Martin R. de Laureal Lauren Geraghty Gordon B. Gsell, Jr. Cooper A. Manning Emily M. Morrison James J. Reiss Andrew B. Rosenberg William M. Russell (504) 582-2563 (504) 582-2558 (504) 582-2525 (504) 582-2557 (504) 582-2657 (504) 582-2566 (504) 582-2526 (713) 393-4549 (504) 582-2556 (504) 582-2533 (504) 582-2565 (504) 582-2561 (504) 582-2623
Analysts’ Compensation
The equity research analyst(s) responsible for the preparation of this report, receive compensation based upon various factors, including effectiveness of research recommendations, client feedback, competitive factors and overall firm revenues, which may include revenues from, among other business units, Institutional Equities and Investment Banking.
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William F. Brennan Kyle Graffagnini Julie A. Guarino James H. Lee, Jr. Blair F. Scanlon (504) 582-2612 (504) 582-2612 (504) 582-2612 (504) 582-2612 (504) 582-2612
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2011 ENERGY CONFERENCE
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